ESAs Defer Final Two Phases of Margin Rules for OTC Derivatives
ESAs have published the final report on joint draft regulatory technical standards to amend the Delegated Regulation on risk mitigation techniques for non-centrally cleared over-the-counter (OTC) derivatives (bilateral margin requirements). In response to the COVID-19 outbreak, this amendment is intended to incorporate a one-year deferral of the two implementation phases of the bilateral margin requirements. ESAs have developed these regulatory standards under Article 11(15) of the European Market Infrastructure Regulation or EMIR (EU No 648/2012). The amending draft technical standards were developed to facilitate further an internationally coordinated approach on adapting the implementation of the bilateral margin requirements.
The one-year extension would result in covered counterparties with an aggregate average notional amount of non-centrally cleared derivatives above EUR 50 billion becoming subject to the requirement to exchange initial margin from September 01, 2021. Additionally, covered counterparties with an aggregate average notional amount of non-centrally cleared derivatives above EUR 8 billion will become subject to the requirement from September 01, 2022. This final report provides explanation on the draft technical standards amending the current Delegated Regulation on bilateral margin requirements with respect to the treatment of physically settled foreign-exchange forward and swap contracts, intragroup contracts, equity option contracts, and the implementation of the initial margin requirements.
A first version of these draft regulatory technical standards had been submitted to EC and published on December 05, 2019. However, in response to the COVID-19 outbreak, that version of the final report and the draft standards has now been updated to take into account the agreement from the BCBS and IOSCO to defer, by one year, the deadline for completing the final two implementation phases of the bilateral margin requirements. This updated version of the final report on the draft regulatory standards on bilateral margin requirements thus replaces the version submitted to EC in December 2019. ESAs have submitted this second version of the draft technical standards, presented in the Annex to final report, to EC for endorsement in the form of a Commission Delegated Regulation. Following the endorsement, the standards will then be subject to non-objection by the European Parliament and the Council.
Related Links
Keywords: Europe, EU, Banking, Securities, Insurance, Regulatory Technical Standards, OTC Derivatives, EMIR, Implementation Timeline, Margin Requirements, COVID-19, Basel III, ESAs, BCBS, IOSCO
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous Article
EBA Updates the 2021 Benchmarking Package to Include IFRS 9 TemplateRelated Articles
HKMA Finalizes Policy Modules on Group-Wide Approach and Remuneration
The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.
EBA Guide to Monitor Threshold for Intermediate Parent Undertakings
The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).
PRA Finalizes Approach to Supervision of International Banks
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
FCA Issues PS21/9 on Implementation of Investment Firms Regime
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
EBA Proposes Regulatory Standards to Identify Shadow Banking Entities
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
IOSCO Proposes Recommendations on ESG Ratings and Data Providers
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
ESMA Group Issues Recommendations on RFR Switch in Interdealer Market
The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.
ECB Study Assesses Impact of Basel III Finalization Package
The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.
ISDA Finds FRTB Results in Higher Capital Charges for Carbon Trading
The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.
PRA Updates Remuneration Policy Statement Templates and Tables
The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.
